>Filing such a lawsuit would be easy enough, but proving that the bot issue justifies ending the deal would be much harder. Under the merger agreement, Musk would have to show that any misrepresentation had a “material adverse effect,” an onerous standard that courts have rarely found to be met.
I think I saw a recent post here that bots made up +19% - interesting timing - but anyway I would think the difference between a platform where the value is the userbase a difference of + 14% in bots would have "material adverse effect".
Matt Levine at Bloomberg (always an informative and entertaining read) looked into that Apr 27
Musk does not have to close the deal if there has been a “material adverse effect” at Twitter. (Sections 4.9 and 7.2(b).) “Material adverse effect” is defined on page 5 of the agreement and it is long. Actually the definition doesn’t say much; it just says, tautologically, that a “Material Adverse Effect” is “any change, event, effect or circumstance which, individually or in the aggregate, has resulted in or would reasonably be expected to result in a material adverse effect on the business, financial condition or results of operations” of Twitter. All the action is in the exceptions to the MAE. As I suggested yesterday, there are lots of them, and it is somewhat difficult to think of an event that would cause a material adverse effect on Twitter’s business but not be covered by an exception to the MAE. If Twitter does badly due to all sorts of general conditions (changes in law, general economic and financial conditions, pandemics, etc.), that does not count as an MAE. If Twitter fails “to meet internal, analysts’ or other earnings estimates or financial projections or forecasts for any period,” that doesn’t count as an MAE; just having bad earnings isn’t enough. And, as usual, bad effects that result from “the negotiation, execution, announcement, performance, consummation or existence of this Agreement or the transactions contemplated by this Agreement” do not count as an MAE, though here they felt it necessary to spell out “including (A) by reason of the identity of Elon Musk, Parent or any of their Affiliates or their respective financing sources, or any communication by Parent or any of its Affiliates or their respective financing sources, including regarding their plans or intentions with respect to the conduct of the business of the Company.” If Elon Musk breaks Twitter by tweeting his plans for it, he still has to buy it.
Twitter's 5% was "Twitter users who logged in or were otherwise authenticated and accessed Twitter on any given day through Twitter.com or Twitter applications that are able to show ads".
Twitter's definition include lurkers while the 19+% number does not. And there are a lot of lurkers.
I think MAE is the contractese equivalent of 'Act of God'. It's applicable if some crazy unexpected thing happens that couldn't conceivably have been picked up as part of due diligence.
4 comments
[ 2.6 ms ] story [ 16.2 ms ] threadI think I saw a recent post here that bots made up +19% - interesting timing - but anyway I would think the difference between a platform where the value is the userbase a difference of + 14% in bots would have "material adverse effect".
Musk does not have to close the deal if there has been a “material adverse effect” at Twitter. (Sections 4.9 and 7.2(b).) “Material adverse effect” is defined on page 5 of the agreement and it is long. Actually the definition doesn’t say much; it just says, tautologically, that a “Material Adverse Effect” is “any change, event, effect or circumstance which, individually or in the aggregate, has resulted in or would reasonably be expected to result in a material adverse effect on the business, financial condition or results of operations” of Twitter. All the action is in the exceptions to the MAE. As I suggested yesterday, there are lots of them, and it is somewhat difficult to think of an event that would cause a material adverse effect on Twitter’s business but not be covered by an exception to the MAE. If Twitter does badly due to all sorts of general conditions (changes in law, general economic and financial conditions, pandemics, etc.), that does not count as an MAE. If Twitter fails “to meet internal, analysts’ or other earnings estimates or financial projections or forecasts for any period,” that doesn’t count as an MAE; just having bad earnings isn’t enough. And, as usual, bad effects that result from “the negotiation, execution, announcement, performance, consummation or existence of this Agreement or the transactions contemplated by this Agreement” do not count as an MAE, though here they felt it necessary to spell out “including (A) by reason of the identity of Elon Musk, Parent or any of their Affiliates or their respective financing sources, or any communication by Parent or any of its Affiliates or their respective financing sources, including regarding their plans or intentions with respect to the conduct of the business of the Company.” If Elon Musk breaks Twitter by tweeting his plans for it, he still has to buy it.
https://www.bloomberg.com/opinion/articles/2022-04-27/bill-h... starts about 2/3 down
You likely refer to https://news.ycombinator.com/item?id=31397137 which looked at public active accounts over a 90 day period.
Twitter's 5% was "Twitter users who logged in or were otherwise authenticated and accessed Twitter on any given day through Twitter.com or Twitter applications that are able to show ads".
Twitter's definition include lurkers while the 19+% number does not. And there are a lot of lurkers.
As ramblerman pointed out at https://news.ycombinator.com/item?id=31397679 "25% of Twitter Users Produce 97% of All Tweets", citing https://www.pewresearch.org/internet/2021/11/15/2-comparing-... .